Sramana: Is that when you started ShapeUp as a for-profit company?
Rajiv Kumar: I got together with one of my colleagues, Dr. Brad Weinberg, who was in the same program as I was. He was a technologist and a self-taught computer programmer. He decided to help me build a software platform that would organize this program. Our plan was to take that software program and make it the basis of a for-profit company which would target HR departments. This was in the summer of 2006. In the fall of 2006, we formally launched ShapeUp.
Sramana: How did you fund the business?
Rajiv Kumar: In 2007, we decided to write a business plan. We wrote a 35-page business plan with financial models and we entered a couple of business plan competitions. We were fortunate enough to win a couple of competitions that resulted in about $100,000 of in-kind services and startup cash.
Right around the same time, we won our first contract with CVS. Between the CVS contract and the prize winnings, we felt that we had enough traction to put medical school on pause and pursue this business.
Sramana: How big was the first contract?
Rajiv Kumar: It was a three-year contract in the high six-figures.
Sramana: So you and your friend left medical school and set up the company. What came next?
Rajiv Kumar: The first thing I had to do was make a call to my mother and tell her that I was leaving medical school for a while. My mother and father are very conservative Indian parents and she is a physician. I had to explain that I was taking a leave from medical school to start an online technology company. That was an interesting conversation. I scoped it as a one-year sabbatical and I was eventually able to get my parents’ buy-in. Ultimately, they have come to support my entrepreneurial endeavor.
Sramana: What happened to the business when you decided to leave?
Rajiv Kumar: We realized that we were trying to have our cake and eat it too. The moment we threw ourselves into the business full time, we got a lot of traction and the business kicked in. We had six employees within months and 12 employees by the end of the year.
Sramana: It sounds like you were organically financing the entire business. Did you grow the company using internally generated revenue?
Rajiv Kumar: We did raise capital. One of the first things we did when we left medical school was to raise a $300,000 friends and family round. It was completed in the beginning of 2008. Many of our investors were other doctors. We also had some of our own contracts coming in. We were also one of the first solutions of this type out there.
Sramana: How far did you get with your $300,000 of financing?
Rajiv Kumar: We got pretty far. We ran for about a year before we raised an additional angel round of a million dollars. We hit a mid six-figure run rate before raising that money. The $1 million round got us into a 7-figure run rate at which point we raised venture capital from two boutique Boston venture firms.